Monday, 11 September 2017

RCMP MUST ACCOUNT FOR FAILURE TO INVESTIGATE NALCOR

The poorly
conceived August 31, 2017 EY Report on the Muskrat Falls project was essentially
irrelevant, albeit with one major exception.

EY stated
that “the Project [still] retains a high level of inherent risk”. The firm said
that the risks included “a series of complex and significant activities” which
will command a “high planned spend rate”.

Cited as
examples were construction at the North and South Dams, continuing power plant
installation, turbine and generator installation, HVDC commissioning, and the
approaching winter.

Why should the
issue of “high level of inherent risk” justify revisiting?

It has less
to do with the unrepayable $12.9 billion project cost — which has irreparably imperilled
the treasury — than it does the deceitful and reckless decisions by Nalcor
senior officials and possibly senior politicians who suppressed public
knowledge of those risks, ostensibly to make the project happen, whatever the
price. As a result, a contrived business case constituted the political fuel
that assured project sanction.

The solvency
of the province is a major issue, to be sure, but don’t discount the importance
of accountability.

When the general
public figures out that they have been unwitting dupes and that public services
will be sacrificed to pay for Muskrat power — though a worse outcome is inevitable
— integrity, full disclosure and governance issues will boil to the surface.
The public will think about the culture of deceit that got us into this mess.
They will query appropriate penalties for malfeasance by public officials. They
will want the chief culprits put in jail.

For that
reason, as the devastating financial implications unfold, sooner or later
Nalcor’s deceit will get public attention. Worth remembering is that at the
heart of the narrative are those unaccounted-for and undisclosed “high level”,
“inherent” risks.

Yes, these
matters have been discussed before.

But it is
worth tying together what we know, acknowledge who issued warnings of possible
malfeasance in the project’s conception and birth, and consider why the
government is, so far, out of step with the urgency of an investigation.

There is a
risk that Nalcor’s management incompetence could be confused with evidence of
falsification and malfeasance. Indeed, the October 29, 2015 EY Summary Report https://www.gov.nl.ca/mfoversight/pdf/EYCostScheduleReview.pdf

may have
helped create that impression. It had found, at that time, several key cost
management process and control risks and issues which included this sampler:

-“Certain
baseline documents defining contractor schedules as well as the documents
defining the control of project schedules were not yet complete.”

-“Nalcor
uses a relatively basic approach to its updating of forecasted contingency
requirements which in our experience is not consistent with the expected
practices for a project of this scale and complexity.”

-“Fully
quantified risks or trends have not been documented for certain significant
challenges on the project. The scale of potential challenges is also not
quantified in the summary reporting…”

However, in the
2016 EY Interim Report, the firm vastly elevated the scale of the problem. The risks
to the cost and schedule had been seriously understated.

EY warned:

-“…
that the September 2015 Forecast is not reasonable.”

-“…
there is a risk of multiple-month delay to completion of the… transmission
line… and risks associated with the remaining scope…”

-“Risks
on cost and schedule are not adequately reflected in [Nalcor’s] September 2015
Forecast.”

-“the
current contingency level… is low…”

The Report
also noted that the all-important Schedule had not been updated in three years.

EY was the
first consultancy to confirm that the figures used by Nalcor to justify project
sanction were “not reasonable”.

Following
release of that Report, newly minted CEO Stan Marshall raised the price tag of
the project from $6.2 billion to $10.1 billion plus financing, and raised it again
— having reached a settlement over Astaldi’s billion dollar claim — bringing
the total forecast cost, including financing, to $12.7 billion.

Marshall also
added $75 million a year to the amount needed to operate the hydroelectric
project, calling the prior 2012 estimates “significantly below industry
standards.”

Added
Marshall: “I don't know what the motivation was. I don't know what happened and
who made the decisions. Unfortunately I have seen a lot of evidence… which
suggests to me that intentionally or otherwise, the costs were significantly
underestimated.”

The mere
suggestion of the word “intentional” by the CEO, in reference to the low-balled
estimates, easily conjures questions of fraud and malfeasance. The
consequences, even if not fully understood by all, are massive.

On its own
merit, the allegation ought to have inspired the politicians to action and tweaked
the ears of the RCMP fraud squad.

What is our
next tie to the EY Interim Report’s and to Stan Marshall’s allegations?

On January
31 and February 6, 2017 the Nalcor whistleblower who worked on the project,
euphemistically known as the Anonymous Engineer (AE), gave considerable
additional context to what Stan Marshall was making pretty clear. Said the AE:

“I could not put up with falsifying
information anymore.

“To begin with, the original cost of
$6.2 billion on which the project was approved was a complete falsification.
The estimate was deliberately kept low — below $7 billion, so as to appear
favourable relative to the cost of thermal power generation.

“The likely costs were known about
three years ago, but Nalcor Management kept it a secret, steadfastly denying
that there were major schedule delays and cost overruns, until it was no longer
possible to hide the true status with the election of a new Provincial
Government.”

Indeed,
following the AE’s disclosure I had expected to hear from the RCMP looking to contact
the whistleblower. He was a witness to the deceit. And, hadn’t the AE called
Nalcor’s public utterances about project costs “falsification of information on
a massive scale”?

But there’s
more.

If the RCMP
felt that the public disclosures by EY, Stan Marshall and the AE were inadequate
to justify throwing off its inertia, SNC-Lavalin made it very easy for them to
open a file on the Muskrat Falls project.

In June-2017
SNC-Lavalin produced a Risk Assessment Report that the company says was presented
to Nalcor officials in 2013 which confirmed many of the reasons that project costs
were climbing to unbearable levels.

The 2013 Report
constituted no ordinary warning. And it was undertaken by no ordinary
engineering firm.

SNC was
integral in devising the financing strategies and engineering design for
development of the Muskrat Falls project. It had been given the EPC contract
until, for still obscure reasons, Nalcor decided to take much of that work
in-house.

The 28-page Report detailed Nalcor’s incompetence in dramatic detail, chronicling a lack of
technical and logistical readiness, as well as recklessness.

Described were
risks that included a failure to do adequate geotechnical investigations at the
North Spur and in the riverbed under the footprint of the dam and coffer dam.
It said that Nalcor ignored the risks associated with the restricted pool of
major contractors who would hold the project's budget and schedule hostage, and
described the Crown Corporation’s gross underestimation of labour and other requirements.
SNC identified 40 risks, 25 of which it considered Very High Risks. It said that
the Very High Risks represent “90% of the total number of identified risks from
the Lower Churchill project. This is unusual for a project in execution” (p.5).

SNC-Lavalin added: “Our concern is we foresee
that the project will incur more than a 30% cost overrun if the project does
not take action on the risk elements raised in the Risk Assessment Report. The
actual project structure is contributing to this increasing risk factor. Client
has limited experience in huge civil work and earth-filled dam work, power line
and power station works.”

SNC had brought
the hammer down on Nalcor. The company confirmed that deceit had occurred at
the highest level. CEO Stan Marshall disclosed that senior Nalcor officials had
been handed the Report, even if the senior Nalcor executive present held
clenched fists.

The Report detailed
what, by any standard, were project killers. SNC confirmed that the Muskrat
Falls project — even prior to sanction — was DOA (dead on arrival).

Strangely,
when the public learned of the Report’s existence, the Premier was ready to
diminish its importance, having contrived reasons (albeit with Stan Marshall’s
help) to delay — or is it deter? — an investigation.

The latest EY
Report is openly more deferential to Nalcor. But it still contains echoes of
the unmistakable gasp with which it first uncovered the project’s complete lack
of both engineering and economic underpinnings. In short, many of the same
major risks it and SNC recited still threaten the reliability of even the
current $12.7 billion project estimate.

States EY: “The
Project, Nalcor Board and the Provincial Government should maintain a
relentless focus on risk management given the Project’s high level of inherent
risk.”

That the
province has been placed in the position of overseeing not merely a boondoggle but
a debacle of untold financial consequence is a certainty.

That’s bad
enough. But the Ball Government wants to ignore the truth that those
disclosures occurred. Worse, the Premier is facilitating a situation in which the
culprits are unimpeded and shielded even from examination.

When a
society has been irreparably harmed, when people’s lives — socially and
financially — are turned upside down due to malfeasance, deceit and chicanery,
is there any solace except whatever justice is derived from seeing the
perpetrators investigated, exposed, and punished?

When the
Government is part of the conspiracy, suppressing any accountability, what does
it say about them?

Is this a
group to whom the RCMP should be paying deference?

Shouldn’t
those who shield possible criminality be investigated, too?

Inevitably,
the RCMP will have to account for its own flat-footedness.

43 comments:

Des Sullivan must be smoking some high end products. To somehow blame the RCMP, the media, regulatory bodies and everyone under the sun EXCEPT the system of government we have in place in this province AND more the Progressive Conservative party and more specifically the then premier Danny Williams for this Muskrat Falls Boondoggle is a stretch to say the least. It is time we focus on changing the system that allows elected representatives to turn the government of this province into their own personal enclave where they do as they please for personal gain through either financial, egotistic satisfaction or fame and walk away from the mess they have left. That is where we are in this so called democracy and not moving forward.

Sounds like maybe a media comment 13:12. Is it the"system of government"' 8:29 as much as the people we blindly elect. We all know that Danny was our saviour and could do no wrong, some believe that he not only took the oil out of the ground, but actually put it there in the beginning; but of course we now know that he did neither, it was flowing and paying off the principle on the builds when Danny arrived, he just came at the right time, and took advantage of the entire province, and taught he was doing the same to Quebec, but all backfired on him. So think we all have to look in the mirror in pointing a finger, we elected Danny and all his cronies, which gave rise to NALCOR. Of course the parrot based media deserves a whole bundle of blame for not questioning and investigating what was being perpetrated on the people, including a whole bunch of false information along with blaten lies, that it we needed the power, and it was the least cost option. Any person with their head screwed on right knew that was false and they provided no evidence that could stand up no more than 2 seconds for anyone wanting to really question it. And if course we know regulatory bodies like the pub, mun, the federal govt, and the bot all did us a disservice by keeping their mouth shut, except for the genius wade. Of course the RCMP should open their eyes when it appears fraud of that proportion appears to have been committed but will leave that to UG as he is quite capable to make is point on that. Agree with you, democracy is not working for us, but we the people own democracy, not the elected representives and other cronies like NALCOR.

Yes "8:29" it's not RCMP's fault... but it's not like our "$y$tem of Government is going to ever police itself now is it???

Of course we need the RCMP because the RNC are under the thumb and funding of the same corrupt oligarchy that's been shanking us for decades. Problem is all the RCMP are in Labrador protecting this fiasco with guns, arresting children and jailing old folks and cancer patients. So who TF else are we gonna call on??

Publicly calling out our national (farce of a?) Police force for supporting blatant and massive corruption and fraud is bang on appropriate and this article or one like it should go national.

Maybe McLeans or others would carry the story if it were pitched to them well ??

Anom :13:12 Why is this off base? There have been numerous projects in the past where the economics were ignored and private industry refused to invest beforehand but government went ahead and built while a few contractors and over paid trades people profited. Let’s start with the railroad in the 1890's and fast forward to the chocolate factory in the 1950's, Churchill Falls in the 1960's, Fish Plants, Labrador Linerboard and Come by Chance in the 1970's and Sprung green Houses in the 1980's and then Muskrat falls in 2012 and this is just a few. All of these projects had dubious financing, poor planning or bad economics which were sanctioned by government and built by private industry. None of them were illegal and this is why the RCMP doesn’t investigate these projects. You will be hard pressed to find any judge in Canada who will interfere with the elected parliamentary and legislative branch of government which is the ultimate goal of any RCMP investigation.

Although your analysis is spot on, I doubt the Mounties will ride up on white steeds and rescue NL. They have Dudley Dooright as their mascot and are inept if not complicitous with the ongoing fraud.

The RCMP have not looked at SNC Lavalin and the curiously similar tactics used in NL and abroad that have resulted in bribery charges abroad. It seems there is zero interest in finding out who the "agents" were that facilitated this epic fraud.

It is no surprise the regulatory oversight was carefully disemboweled prior to sanction to ensure the fraud proceeded without a hitch. The Opposition and media asked nary a question as NL's fiscal future was undermined. The warnings of informed stakeholders were ignored and dismissed as "naysayers".

As much as I wish that the RCMP would investigate and charge the guilty they are as inept as the other institutions intended to prevent a ransacking of the treasury. In other words Dudley doesn't Do Right.

Superbe article again UG in staying on top of it all, and trying to tie it all together. The boondoggle is indeed mind boggling fir the average joe like myself. I will refer to one of my earlier comments that we as ordinary persons don't comphrend the real difference between a million and a billion, and this also includes the police forces. ( just to reinereate, if you were to count a million $ and a billion dollars at the same rate, say 1$ per second, you could count a million $ in 11.5 days, and a billion $ would take 33 years, I wonder how long would it take to count 15$ at the same rate?? )The point is we are talking big bucks that few can comphrend, for a small group of people, some one half a million people. The police forces are good at petty crime, they will spend thousands to maybe retrieve hundreds, you can see it when they display their collected wares in public, so many pounds of marawanna, illegal cigarettes, bottles if booze, etc. do they ever indicate how much it cost to collect it. When you talk millions and billions they are not really interested, nor a governments. We are reduced to the government in this province looking after and counting the pennies, like closures of libraries, but the big bucks to look after are left to the NALCOR dummies, like oil royalties, mining, and spending on muskrat. It use to be called penny wise and pound foolish. And that is exactly the state if this province and the handlers of the treasurery. Get a grip for Christ sake and look after the millions and billions, any fool can look after the pennies.

Is that right; 15$....15seconds....and 15$ billion, almost 500 years...ever since John Cabot....almost....and our 30$ billion debt...almost a thousand years...half the time since BC....how long to pay it back...don't be so foolish b'y....never....

Hey, JT and cabinet is coming to town. Time for full disclosure why Fed Libs are pushing for completion of Muskrat, despite the wide degree of dissent registered here, and Globally, (NY Times, Economist, etc.). Will the Press be invited? What will O'Regan have to say? How about a Town Hall in Mud Lake?

Disappointing that the Newsworld press conference now live from STJ, has lots of questions about the privileged few getting safely back from the Turks, and the loading of goods on the St. John's in Norfolk for the poor unfortunates South. But where are the press and questions about why the Liberals continue to finance the Boondoggle?

I'm been to the RCMP Office in Baie Verte to start an investigation and they would not even take my statement. Yet they will give you a $600 ticket for driving a quad. These Servants work for Gov, and protect Gov. It's their Private Security Force that WE the People, pay for with the Taxes that they Steal from us. So I want you to watch this and start taking action. https://inpowermovement.com/liability-action-document-templates/ Also if you have bank or Gov Debt ues this. http://michaeltellinger.com/promissory-notes/

Didn`t the Hickman Equipment issue of some 20 million goon for more than a decade and no result........and did not the RCMP say they would no longer do big deal fraud investigations for lack of resources for investigations...........seems absurd if that is right, and an invitation for corruption here ........so is RCMP part of the problem.

As Des said,the absence of an RCMP investigation with all the allegations and whistleblower info so far, put in the public domain will leave them having to explain. Something is blatently wrong and smells to the high heavens of imcompetence and massive fraud with the whole MF debacle and yet it continues. NL simply cannot afford to pay this back.NL residents now and 2 generations into the future will be saddled with unbearable taxes and power bills with public services cut to the bone and massive increases in the cost of living and the Ball Government allows it to go on. WHY??It's astounding we have no protection whatsoever.God help us--no one else will.

Correct me if I am wrong..........we have one criminal code for all of Canada, but the Administration of Justice is carried out by each province as they see fit, which leaves a lot of wiggle room for interference with true justice. The province pay Ottawa for RCMP services, and as they say the piper plays the tune. And the RCMP have black horses, not white steeds, black , just like the color of Darth Vader......who says evil is good. Is there hardly 6 months that go by without some new RCMP crime, such as sexual assaults on their own female officers...., the officer in Hopedale, that they let the clock run out on, Mountie sexually his son........no end to it....... So do the top brass care about this fiasco that may involve criminal activity.......... Their first crime was to enable Canada to deprive aboriginals of their land and rights........and still engaged in that. Do they enable crimes as to Muskrat for failure to investigate........maybe so.

As a watchdog on UARB, Ecology Action helps keep a balance in rulings which benefit ratepayers. It has been commented here previously that the PUC in NL, without a similar watchdog role, tends to rubber-stamp Gov./NALCOR policies and actions. Hopefully, people like Winston, thinking of future energy use and ratepayers' interests, will open a branch of EANL.

I do not know the exact mechanism, but there is more than enough justification for Public Enquiry,which may result in identifying the persons responsible for such financial disaster, they should be held responsible under the Law if applicable. But first step is to idenify those responsible.Madan Rana

Guess the 15$ billion question is will the premier actually call an inquiry and how soon, or will he be convinced by the powers that be that it has no merit, and will only add to the cost, and the already years of delay. I say the gigs up ....no more BS ...let the chips fall where they may.

You may have a point, as you know lot of $$ have gone down the drain, but there is enough justification for an enquiry and we the consumers/tax payers has right to know the identity of people responsible and bring them to explain why? plus to ensure it does not happen again.Madan Rana

Bruno, I agree. My first thought upon hearing this was that it's a diversion. It's rather odd that upon all the discoveries and disclosures of a greater magnitude, this got the bee under Ball's bonnet. If the AE's revelations of falsifying information DID PASS his smell test then we really must be cautious. Maybe this is their OUT. They can easily pass off project cost escalation to this 'outside' group without spilling any blood on the real authors of this financial disaster. No doubt there are those within this group who have been milking the money cow for sure like the individual invoicing for 3167 hours in one year. Hopefully the scope of any inquiry is not just limited to embedded workers but a full-blown version that starts with those responsible for population projections, power forecasts and the decision to proceed without any water management rights. Then on to the cost estimates, contracts and so forth. We need to make sure that the scope for the inquiry is made public and is satisfactory before the proceedings begin. For some reason, Ball's sudden interest do not pass my smell test.

Just voted on vocm 's question of the day, and noted the brave media, uses the term of waste of money, how ironic when muskrat will most like be 15$ billion wasted, and probably bankrupt the province, if that's possible, a good try at it any way. Noticed the straw vote is close. Have to consider that a lot of people have a vested interest in muskrat, either directly or indirectly, so know where these votes go, and of course have every right to do so. Then there are the others that say any money spent by govt. is a waste anyway, plus those that don't know the difference between a million and a billion dollars, it's just a lot, or what's the difference, it's just wasted. Most like that are Penney wise and pound foolish. If it cost 10 or 20 million for an enquiry, and I have no idea, so what, muskrat spent more than that, or wasted, in the time it took me to write these few lines, or while on their coffee break. I don't think a lot will come from the enquire, if it is held, other than making some squirm and show they have very short memories, continue to lie through their teeth, but that alone is worth a lot more than the few million spent on having them exposed in a public forum. I say giver. But ball et all might be talked or threatened out of this before it gets started.

What lessons for NALCOR in transmission line failure in Florida. This is supposedly a state of the art "Smart Grid" system. How "smart" is the NL grid? What are the weather risk factors, bringing power from Labrador to the Avalon?

Trudeau is having a meet and greet in Quidi Vidi this afternoon. This is the chance to put the question about the loan guarantee facilitating a boondoggle. What will the feds do to defend the Land Protectors in Labrador?

Just to update my on-going energy use from monitoring:August month used 65.9 Kwh , which at 10 cent power = $6.58, which is lower than July. This includes heat, air conditioning, and the standby power ( which is $3.00 per month, so $3.58 for power used. Ground temperature seemed to get warmest on Sept 2, at 62.1F, so August lowest month month for heat since the ground temperature is then warmest. Technically we have a 12 month heating season, but just a little for July and Aug. COP is about 5 or better for this time of year , so if using baseboard, even summer heat is significant, and nite time outdoor temperature about 50F, causing some early morning heat. The power companies refuse to do this type of monitoring here, least the true potential of energy savings be known.A friend, a MF supporter, who has a son working for Nalcor, intended to install an efficient HP ONLY when power reached 16 cents.........he installed one last week, with power still only about 10.5 cents.........seems we have reached the tipping point and many are making the switch, without incentives. As to an inquiry into what went wrong with MF, one must ask how can the power companies still continue to deceive people on energy efficiency for heating............to ignore this was one of the false assumptions prior to sanction,and they continue on that track......so will the terms of reference exclude why this was ignored and still ignored! TV ads still promoting putting on sweaters, programmable thermostats, and stupid Scallywag ads showing cute carton creatures as heat loss devils. The real scallywags ( a word with many negative sexual connotations) are the same people that has promoted the boondoggle, which includes the Take Charge crowd. Scallywags.......a `whore` is the general meaning!. Best they get that off TV least kids start asking questions. `Scallywags Behind the Muskrat Fiasco`; that will be the finding of the inquiry, at 15 million cost, but nothing criminal, as pardons given in advance so they testify to their quilt and incompetence. The Criminal Code don`t cover scallwags, Robert. So even the RCMP is powerless, being infested themselves with this problem.Winston

Lol, right on Winston, you out did yourself this time with your scallywag comments et al. All so true, that what use to be a reputable company in the province have lowered themselves to a poor attempt at comedy on such a serious and costly issue. They behave as if it is all one big joke. I turn it off every time it comes on, spending our money to insult us. Yes b'y put on another sweater, from the wool off of aunt Marther's sheep, creat a new industry, and we won't need nl power anymore.

Indeed, power storage Telsa is selling, another company is now offering 50 percent lower cost than Tesla for storage capacity. I have a Tesla deposit for an electric car, but Hyuandi has a new model considerably less cost , and Leaf has added a new model larger now than the Leaf, with more battery capacity, better styling, and lower cost than Tesla........big improvements all around..........wind,and solar plus storage for new generation is a game changer for adding generation capacity, but efficiency by reducing demand is still the lowest cost by far (about 3 cents per kwh from NOva Scotia measures). But for most jurisdictions, both approaches are needed.WA

About Des Sullivan

Uncle Gnarley is written by Des Sullivan, of St. John's.
He is a businessman engaged in real estate, retail and development companies.
A Director of Sullivan Capital Corporation, he is a former Executive Assistant to Premier's Frank D. Moores (1975-1979)and Brian Peckford (1979-1985).
He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).
Uncle Gnarley permitted the use of his highly regarded name provided he could have full access to state his own rather unequivocable opinions. (A more detailed Profile of Uncle Gnarley is described in the very first Post entitled "Uncle Gnarley is alive and well" found on this site.
Sullivan is a firm advocate of sound fiscal management by the provincial government and intends to use this Site as a forum for commentary on the major issues of the day. Says Sullivan, "Newfoundland and Labrador inspires debate on a variety of issues, a veritable Muskrat Falls of opinion".
Readers are invited to leave their opinions, too.
Uncle Gnarley will post every Monday, and more often as events warrant.